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TSP: 'Please hold on to the bar'

Arthur Stein, certified financial planner, SPC Financial

This week, the Dow had its largest-ever point drop during the course of a single trading day. "It was a real heart stopper," said certified financial planner, Arthur Stein.

It was so bad, Stein told Federal News Radio, "some shares of some stocks actually went to zero."

While many market watchers attribute the plunge to "some sort of glitch because those companies were clearly not worth zero," it still may have an effect on your Thrift Savings Plan.

Looking at last month's returns (see tables below), the only negative, said Stein, was in the International stock fund, "and that is just a direct reflection of the problems we're having in the world stock market which is mainly due to this problem in Greece."

Fund

G Fund

F Fund

C Fund

S Fund

I Fund

Month

0.28%

1.07%

1.58%

4.82%

-2.35%

YTD

1.09%

2.90%

7.06%

15.21%

-1.52%

12 Month

3.22%

8.40%

38.97%

50.87%

34.76%

L Funds

L Income

L 2010

L 2020

L 2030

L 2040

Month

0.50%

0.51%

0.76%

0.94%

1.05%

YTD

2.23%

2.36%

4.07%

4.87%

5.44%

12 Month

10.31%

12.30%

24.48%

29.34%

33.42%

Sixty five percent of the I fund is made up of companies from Europe and the UK. Thus, it was the only TSP fund that posted negatively last month. (For more on that, see Most TSP funds see gains in April.)

Stein says "it's just a good example of the unfortunate fact that investors in the United States now have to worry about what happens even in a country as small as Greece. International stock markets have become so intertwined that when one goes down, frequently others go down, including the US market."

Stein noted that just before the market melted down yesterday, it was already down about three percent. After coming back up, it closed down, also about three percent. The net difference after the roller coaster came to a stop was about zero.

"Let's look at what that means for us today," said Stein. "well, one, it means that people who are investing are buying stocks that are lower in price, so maybe it's a good time to invest."

And, added Stein, interest rates are down as a result of this. "Which means that 30-year mortgages are now around 5.7% which is a very good rate for a mortgage."

That's the good news. "The bad news about interest rates being down is that money market funds," said Stein are averaging returns at about 0.76%. And with one-year CD returns not much better, that's less than half of the current inflation of about 2.4%. Doing the math, the gains aren't keeping up with the losses.